The Treasury market spent another quiet day yesterday as traders waited for the indicators due out at the end of the week, especially the May producer and consumer price reports.
Late in the afternoon, most prices were little changed from their closing levels Monday, with the 30-year bond 1/32 higher to yield 8.47%.
Prices dipped in overseas trading and the long bond yield reached 8.51% during the New York morning session.
But at those levels, some retail investors decided to buy securities, and that buying was reinforced by short covering by traders who were disappointed when the market failed to move lower.
"We learned for the third day in a row that there is some selected retail interest at approximately 8 1/2% on the 30-year Treasury bond," said William Sullivan, director of money market research at Dean Witter Reynolds Inc.
Mr. Sulivan said the question was whether these support levels will hold if the information due out tomorrow and Friday is stronger than the market expects.
The May producer price and retail sales reports will be released tomorrow and May consumer prices and industrial output will be released Friday.
Traders seemed particularly concerned about the inflation numbers and said there was alk yesterday that the core rate of consumer inflation would come in higher than the 0.3% gain that economists expect.
"The possibility of a bad number Friday is hanging over people's heads," a government nort trader said.
The market showed no reaction to Fed Chairman Alan Greenspan's testimony to the House Banking Committee yesterday, which was mostly about international banking.
The market also ignored the $10.2 billion first-quarter current account surplus the Commerce Department
Treasury Market Yields
Tuesday Week Month
3-Month Bill 5.72 5.73 5.62
6-Month Bill 6.04 5.95 5.85
1-Year Bill 6.36 6.23 6.07
2-Year Note 6.97 6.76 6.80
3-Year Note 7.38 7.16 7.10
4-Year Note 7.57 7.36 7.35
5-Year Note 7.94 7.77 7.73
7-Year Note 8.16 7.98 7.98
10-Year Note 8.27 8.11 8.12
20-Year Bond 8.51 8.33 8.34
30-Year Bond 8.47 8.33 8.33
Source: Cantor, Fitzgerald/Telerate
announced yesterday morning.
The current account measures trade in both goods and services. The surplus was the first since 1982 and was due in part to $26.2 billion of payments the United States received from allied nations to fund the Persian Gulf war.
The September bond futures contract closed 1/8 higher at 93.
In the cash market, the 30-year 8 1/8 bond was 1/32 higher, at 96 4/32-96 8/32, to yield 8.47%.
The 8% 10-year note rose 1/32, to 98 1/32-98 5/32, to yield 8.27%.
The three-year 7% note was up 1/32, at 99 30/32-99, to yield 7.38%.
Rates on Treasury bills were mixed, with the three-month bill three basis points lower at 5.57%, the six-month bill one basis point higher at 5.79%, and the year bill unchanged at 6%.
Prices Bustin' Out All Over
The era of U.S. Treasury price dissemination has arrived with a vengeance, with both Telerate and GOVPX Inc. planning to make more government security prices available to investors this month.
GOVPX confirmed yesterday it will begin transmitting price information on all outstanding Treasury securities on Sunday evening, at 6 p.m. edt, when the Japanese, markets open for business.
Five of the seven interdealer brokers will supply their prices to GOVPX, which will distribute them 24 hours a day on a real-time basis.
Sixty percent, or $69 billion, of the $115 billion average daily trading volume in Treasuries is done through the brokers. GOVPX estimated its screens will reflect 75% of the business done through brokers.
Cantor Fitzgerald Securities Corp. and EJV Brokerage are the two brokers not sending prices to GOVPX.
Cantor Fitzgerald, which until now was the only broker to make its price screens available for information purposes, said Monday it will begin offering more securities prices and anlytical services on Telerate Inc., which is owned by Dow Jones & Co.
Harry Needleman, a senior vice president at Cantor, said the firm will begin to broker and display prices for all 240 outstanding Treasury issues. Previously it brokered trades in only about 80 of the most actively traded issues.
Cantor will also begin displaying prices for agency securities, zero coupon bonds and basis trades, sectors in which it already brokers trades but it just beginning to distribute prices, Mr. Needleman said.
He denied that Cantor Fitzgerald's expansion had anything to do with GOVPX.
"It's really a response to the market itself," Mr. Needleman said. "The buy side is becoming quite sophisticated and they're demanding more information. So we felt we should expand our coverage."
GOVPX's Chairman, Kenneth M. deRegt, managing director of fixed-income at Morgan Stanley, said he expects the service to be available on Reuters, Knight-Ridder Financial, Automated Data Processing and CQG, although final contracts have not yet been signed.
In addition to giving the bid and offer on all outstanding Treasuries, GOVPX gives the yield corresponing to the bid, the price on the last executed trade, and how many of each security trades so far that day. If the security has not traded that day, the date of the most recent trade is given.
Mr. deRegt acknowleged that GOVPX was started in part because of pressure from regulators.
GOVPX satisfies all the elements the General Accounting Office mentioned in a 1990 report to Congress that called for broader dissemination of Treasury price information, he said.
Mr. deRegt said the information distributed by GOVPX will add to the pressures in the already competitive goverment bond market.
On the other hand, he said, "If spreads are nonexistent, they can't get much narrower."
Government bond dealers do not charge a commission. Instead, their profit is the spread between what they pay for a security and what they sell it for.